UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION, et al.

, Debtors. ) ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification # 13-3489233) Honorable Steven W. Rhodes

RESPONSE OF FORD MOTOR COMPANY TO THE UNSECURED CREDITORS COMMITTEES AUGUST 11, 2006 MOTION FOR AN ORDER DIRECTING EXAMINATION AND PRODUCTION OF DOCUMENTS REGARDING HERMOSILLO PURSUANT TO RULE 2004 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE

Ford Motor Company (Ford) files the following Response in opposition to the Unsecured Creditors Committees Motion For An Order Directing Examination and Production of Documents Regarding Hermosillo Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (Motion). INTRODUCTION AND STATEMENT OF FACTS The Unsecured Creditors Committee (Committee) filed an eleventh hour1 Motion seeking information about potential claims involving a non-debtor, Collins & Aikman Automotive Hermosillo, S.A. de C.V. (C&A Hermosillo). The Motion appears to arise out of financial accommodations provided by GE Capital De Mexico, S. De R.L. De C.V. (GE Mexico) for the construction of C&A Hermosillos plant and efforts by GE Mexico to enforce its agreements with C&A Hermosillo in Mexico.

As will be discussed more fully later in this Response, the Motion was filed shortly before, and in apparent anticipation of, the filing of the Debtors Plan of Reorganization.

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The thrust of the Motion with respect to Ford is the Committees assertion that GE Mexico, its affiliate General Electric Credit Corporation (GECC) and Ford2 engaged in activities that constituted tortious interference with contract or induced a breach of a contract between Ford and the Debtor3 (Motion at paragraph 3). Among other things, the Committee asks for documents and depositions that relate in any way to any contemplated transactions between Ford and GECC and/or GE Mexico to initiate foreclosure proceedings against C&A Hermosillo or its assets including, but not limited to, any such transactions that would involve the sale of the Hermosillo plant to Ford by GECC and/or GE Mexico (Motion at paragraphs 3, 22 and 26). These hypothetical actions, according to the Committee, may have interfered with the contractual relationship between Ford and C&A Hermosillo (id.) and caused damage to Collins & Aikman Corporation, the alleged ultimate parent of C&A Hermosillo. Ostensibly to investigate this claim, the Committee seeks the documents described in Exhibit C to the Motion and deposition testimony with respect to the same subjects. The Motion is factually inaccurate in material respects and vastly misrepresents the nature and scope of the relationship among Ford, Ford Mexico and C&A Hermosillo. As set forth more fully in the attached Declaration, Ford Mexico purchases production parts from C&A Hermosillo. Notably, C&A Hermosillo makes production parts for the
The contracts (purchase orders) are actually between the non-debtor C&A Hermosillo and Ford Motor Company S.A. de C.V. (Ford Mexico) or (for service parts) Ford. See the attached Declaration of Fords Director of Interior and Electrical Purchasing (Declaration). The Committee does not explain how Ford or Ford Mexico could wrongfully interfere with its own contracts or induce itself to breach the contracts. In paragraph 26 of the Motion, the Committee alleges that it seeks discovery with respect to claims for tortious interference with respect to contracts relating to C&A Hermosillo and the Hermosillo Plant or otherwise. The only such contracts to which Ford or Ford Mexico are parties are contracts for the purchase of parts. See also paragraph 3 of the Motion ("actions constitute tortious interference with the contractual relationship between Ford and C&A Hermosillo to the detriment of Collins & Aikman Corporation.).
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Ford Fusion, Mercury Milan and Lincoln Zephyr automobiles, which are assembled at Ford Mexico's plant located in Hermosillo. Without parts from C&A Hermosillo, the manufacture of these popular vehicles would cease, causing incalculable economic damage to Ford Mexico and Ford. The interest of Ford and Ford Mexico in C&A Hermosillo is simply that of a customernothing more and nothing less. When Ford learned that GE Mexico considered C&A Hermosillo to be in default and potentially subject to foreclosure or other remedies, Ford Mexico and Ford became concerned over the consequences of any such actions on the production of parts. As a result, representatives of Ford Mexico, GE Mexico and GECC met in November of 2005 to discuss what assistance Ford Mexico might provide to prevent any interruption in part production. Ultimately, no agreement of any kind was reached, and part production continued. Neither Ford nor Ford Mexico induced any actions by GECC Mexico or GECC and, indeed, it would have been counterproductive for either of them to have done so. Later, in August of 2006, after Ford and Ford Mexico learned that GE Mexico sent a notice of termination under the Construction Agency Agreement to C&A Hermosillo, a phone conference was held among representatives of the same parties. This call led to nothing more than an understanding that any substantive discussions would require the prior execution of a confidentiality agreement among the parties. To date, no such agreement has been prepared, negotiated or even discussed, let alone executed. C&A Hermosillo continues to produce parts for Ford Mexico in accordance with the contracts between the parties. The Committee does not allege, and the Debtors

have not asserted, that any breach has occurred. In short, neither C&A Hermosillo nor any Debtor has suffered any damage or injury. The Motion does not set forth any cause for a Rule 2004 examination, is overbroad, untimely, factually and legally incorrect and seeks an almost incalculable number of documents and depositions from Ford; it is nothing more than an attempt to harass Ford, GE Mexico, GECC and the Debtors. Significantly, this request comes over 14 months after the filing of the Debtors cases and at perhaps their most critical juncture. The Debtors filed their Plan of Reorganization on August 30, 2006, and have commenced the plan confirmation process. Because the Plan makes it clear that the unsecured creditors are out of the money,4 it is not unreasonable to conclude that the latest rounds of requests for documents and depositions are nothing more than an attempt to gain leverage in the plan negotiations. At the same time, and as part of the Plan confirmation process, the Debtors are negotiating with Ford and their other major customers the terms and conditions under which these customers will do business with the post-confirmation Debtors. The focus of Ford should be on reaching agreement on future relations with the Debtors -- and not on combing files for irrelevant documents. The Motion should be denied.

Under Article III of the Plan, it is clear, at least to the Debtors and their plan sponsors, that the holders of unsecured claims, Classes 5 (General Unsecured Creditors), 6 (Senior Note Claims), 7 (PBGC Claims), and 8 (Senior Subordinated Note Claims), are out of the money under the absolute priority rule, and are "not entitled to any distribution" under the Plan (Plan at Art. III, C. 3, 4, 5, and 6, p.17).

ARGUMENT I. There is No Evidence of Any Tortious Interference With, or Breach of, Any Contract With Any Debtor and Therefore The Committee Has Not Shown Any Need For A Rule 2004 Examination

The supposed predicate for the Rule 2004 examination is tortious interference with, or breach of, a contract (or contracts) between (i) GECC and/or GE Mexico and C&A Hermosillo, and (ii) Ford5 and C&A Hermosillo, in both cases presumably causing damage to Collins & Aikman Corporation, the alleged indirect parent of C&A Hermosillo (Motion at paragraphs 3 and 26). As explained in the Declaration, Ford made no agreements with GE Mexico or GECC concerning C&A Hermosillo. As to the Ford purchase orders, it is a mystery how Ford Mexico (or Ford) could commit tortious interference with a contract to which it (or its subsidiary) is one of two contracting parties. Consequently there is no colorable claim against Ford of Mexico (or Ford) under such a theory and no plausible reason for requiring Ford of Mexico or Ford to provide documents or depositions. Furthermore, there is no colorable basis for a claim of breach of any contract between Ford Mexico (or Ford) and C&A Hermosillo caused by the interference of any party. C&A Hermosillo continues to perform its contracts with Ford Mexico, and the Committee does not even allege that a breach has occurred. Moreover, even if a breach had occurred, it would not involve a Debtor and therefore the matters to be investigated would not have any relationship to the administration of the Debtors estates. In re Johns-Manville Corp., 42 B.R. 362 (S.D.N.Y. 1984) Any contract dispute

Ford will assume, for purposes of this Response only, that the Committee means to include Ford Mexico within this allegation.

between Ford Mexico and C&A Hermosillo would be a matter for Mexican courts to decide under Mexican law.6 Finally, the Committee fails to explain how it would have standing to assert any such claim. In short, there is simply no cause for imposing a 2004 discovery obligation upon Ford.7 II. The Purpose of the Motion Is Merely To Abuse and Harass Ford

Even though the scope of a Rule 2004 examination is broad, it is not unlimited. Courts have not permitted examinations under this rule where the purpose of the examination is to abuse or harass. In re Enron Corp, 281 B.R. 836 at 840 (Bankr. S.D.N.Y. 2002). In the present case, the timing of the Motion and the lack of any credible foundation for the Motion demonstrate that the real motives behind the Committees actions are to harass the customers and, by logical implication, the Debtors8 in order to obtain leverage in Plan negotiations. The distribution to unsecured creditors in the Debtors Plan of Reorganization may, in fact, be nothing. In bankruptcy parlance, it appears that the Committees constituents are out of the money. As a result, the Committee will utilize every tactic it can muster to delay, hinder and harass the Debtors and their customers in order to achieve a larger payoff. It is hardly coincidental that the Motion was filed at this time. This Court should not allow a disruptive Rule 2004 examination to become a bargaining
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Under Section 39.07 of Fords Production Purchasing Global Terms and Conditions, the purchase orders between Ford Mexico and C&A Hermosillo are governed by Mexican law.

The Committee does not distinguish between Ford and Ford Mexico in the Motion. This Courts ability to compel discovery from Ford Mexico is unclear at best. Most, if not all, of the items sought by the Committee would appear to involve Ford Mexico and not Ford. Granting the Motion would require this Court to engage in an extensive analysis of jurisdictional issues that would be both expensive and time consuming. In view of the lack of any compelling justification for the discovery sought by the Committee, resolving such a complex issue would waste valuable time and judicial resources in the midst of the plan confirmation process.
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While the Rule 2004 Motion is addressed only to Ford, GECC and GE Mexico, it is hard to imagine that the Debtors will not be drawn into this dispute to their detriment.

chip in the plan confirmation process. Since the only realistic purpose for the Motion is to gain leverage, the Motion should be denied. III. The Rule 2004 Examination Sought To Be Imposed Upon Ford Is Disruptive and Overly Broad

While the scope of a Rule 2004 Examination is broad, it cannot be overly disruptive or costly to the party to be examined, especially when it is a non-debtor party. In re Fearn, 96 B.R. 135 (Bankr. S.D. Ohio 1989). In the present case, the Committee has made no effort to limit the scope of the discovery, the persons to be discovered, or to clearly specify the topics to be examined. Rather the Committee asks for All documents relating to the Hermosillo Plant; All communications between Ford and GECC and/or GE Mexico relating to the Hermosillo Plant; and All documents relating to any transaction being contemplated by Ford relating to the Hermosillo Plant (emphasis added).9 These requests are not limited by time, parties to the communications, or type of transaction. Ford has over 36,000 persons in the United States alone with email accounts presumably it would have to examine all of these accounts to see if any documents exist that could come within these requests. The physical files in the United States and Michigan are staggering, and hundreds or even thousands of hours of employee, and attorney, time would be needed to review them for both content and privilege.10 The Committee has placed the entire burden of this specious request upon Fordit

Presumably all documents or transactions would include all purchase orders, all internal memoranda and all email communications that relate to any aspect of any of the dealings between Ford Mexico and C&A Hermosillo. The proposed order purports to make the discovery subject to the entry of an appropriate protective order, but it gives no indication of its scope or form. Resolution of privilege, trade secret and work product issues alone would be staggering.
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has not conferred11 with Ford nor has it made any attempt to set any reasonable limitations upon the requested discovery. Once again, as with the Committees prior Rule 2004 request (which was denied by this Court as being overbroad), the Committee has used a scattergun approach in an effort to disrupt one of the Debtors major customers with no anticipated benefit to the Committee. This should not be permitted. Absent a colorable claim that a contract has been breached and that damages have been suffered by a Debtor, the Motion is nothing more than bad faith snooping and should be denied.

Respectfully submitted, MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.

By:

/s/ Stephen S. LaPlante Stephen S. LaPlante (P48063) Attorneys for Respondent 150 West Jefferson, Suite 2500 Detroit, MI 48226 (313) 963-6420 laplante@millercanfield.com

Dated: September 5, 2006

Other than a telephone conference, only hours before the Motion was filed, with Fords counsel seeking concurrence with the Motion as required by the local rules.

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